California Lawyer: Liquid Gold

Nestlé’s deal for a water-bottling plant in a Mount Shasta mill town sets off a fierce legal battle that splits the community.

Contention over the contract terms agreed to by Nestlé Water and Board members of the McCloud Community Services District in 2003, has divided a once peaceful town into warring factions and set off a five year legal battle.

"Robert J. Saperstein, outside counsel for Nestlé and a shareholder at the Santa Barbara office of Brownstein Hyatt Farber Schreck, says the contract was by no means out of line. Rather, he says, it reflects similar contracts the company holds in other places around the state, and conforms to standard water law.

"'It could have been [just] a typical industrial water contract, but in fact it offered significantly more to the district,' Saperstein says. 'You pay for a hookup, you agree on a rate structure, and you pay something for exclusivity. [Opponents of the deal] emphasize that the rates under the contract were low compared to what they’d be in Southern California. But McCloud isn’t in Southern California—water sells for different rates in the north and the south. Nobody pays south-state rates in the north. That was one of the things that drew Nestlé to McCloud in the first place.'"

. . .

During the five years that the two sides have been in court, many aspects of the project and legal battle have changed.

"Last May, Nestlé Waters announced that it would scale back the proposed McCloud plant by 60 percent. It also agreed to produce a new EIR, baseline data for which could take two years to establish. David Palais, Nestlé’s project manager for Northern California and the Pacific Northwest, says the revised project reflects the changing realities of the business. 'Since we started negotiations five years ago, we’ve built a bottling plant in Denver and expanded our operations at other western sites,' he says. 'We no longer need a plant at McCloud of the size we first proposed.'"